Ufond Blog. Charity fee
Today, the topic of taxation of charitable contributions in Ukraine is quite relevant, controversial and painful. And tax-free charity itself exists only formally.
This, of course, does not mean that charity as a social phenomenon will decline, but it can significantly reduce public confidence in charitable activities. After all, despite the fact that Ukraine is on the 90th place out of 139 in the World Giving Index , given that it was recently on the 103rd position, most Ukrainians will think three times whether to take their participation in charitable activities. Why so? The most common answer is distrust created by the state apparatus, in particular its tax system.
First, a potential benefactor may not be satisfied that not the entire amount of his contributions will go to a certain addressee, some will go to cover the tax in accordance with applicable law and to collect in the Pension Fund.
Secondly, the charitable collection is considered by the Tax Code and the Ministry of Finance as income, and therefore Ukrainian charitable organizations and foundations have to give a significant part of the funds raised for a particular treatment to a particular person in the form of tax contributions to the state treasury. If in the first case it will only reduce the charitable activity of citizens, in the second - it can prevent saving lives.
And what about other countries in the world?
Countries with developed and stable economies have long settled the issue of taxation of charitable funds, moreover, their population has long known and experienced from their own experience that doing charity is prestigious, profitable and safe. As a result, countries such as the United Kingdom, Germany, Italy, the United States, Singapore, the Netherlands, Slovakia, Poland, and France have long adjusted the system of taxing charitable funds raised by charitable foundations and organizations that have been officially audited and registered. Can we say that these countries have for the first time come to understand how the charity system should work in general? Probably not. But the fact that the very appearance of the phenomenon of charity at the legislative level there appeared much earlier than in Ukraine is a proven fact.
In 1997, with a clean slate and with great ambitions, Ukraine began to approve the processes of charitable activities at the official, legal level. The fact that this happened in the 6th year after the adoption of the Constitution is very welcome, but was it worth inventing a bicycle? Maybe it was necessary to look around, look closely and see that bicycles have long been invented, instructions for them are printed, and in general they are already in mass use? Sometimes it is still useful to change the methods in their activities.
And, in this case, to change the method of "trial and error" to the method of "acquaintance with foreign experience" or, as the classic Taras Shevchenko said: "не Do not shy away from your own, learn from others."
Speaking of foreign experience, I mean, first of all, the historical background - the English cause of 1891, which became a fundamental document for the further rational development of lawmaking in the field of charity. It is the basic principles of this historical trial and formed the basis of modern legal regulation of charity in the same Britain, Italy, Germany and France.
Back in 1891, the London House of Lords held a high-profile lawsuit involving John Pamsel, the Moravian Church and Lord McNugten, which called for a tax to be levied on charitable funds raised by the church. considered charitable, and it was emphasized that taxation policy should in no way affect not only the church but also charitable organizations.
So why are we stepping on the same rake again? Why, when we sincerely want to help a person, the state demands money for this targeted assistance? Perhaps this is our modern consumer mentality, which unfairly identifies and equates the concepts of "help" and "money" ...
This can be seen in the current Ukrainian legislation, which identifies the following types of charitable assistance: material, targeted and non-targeted. Unfortunately, there is no clear distinction between them in the current Tax Code, but the system of taxation of charitable assistance (which is strange and incomprehensible) is defined and prescribed in Articles 164, 165, 170.7 of the Tax Code of Ukraine. And it is not written in favor of charitable foundations and organizations. Thus, if the charitable assistance of a certain charitable foundation is directed to an individual, then its recipient is obliged to pay income tax. Usually, a person who receives charitable assistance cannot do so, so the personal income tax of 18% determined by the Code is paid directly by the charitable fund. And if the person did not apply for help to the charity fund,
In general, in Ukraine, by law, all income on account of an individual is subject to taxation. There is also a penalty for late payment of tax. The fact that the state legally "allows" the tax sphere not to be taxed is not a drop in the ocean, but in the whole ocean! In 2018, the minimum amount of tax-free charitable assistance is 2,470 hryvnias. In cases when a person needs, for example, for treatment or rehabilitation, hundreds of thousands of hryvnias, this amount, of course, does not even look funny, but sarcastic, and even with a hint of bullying.
We can say that charitable activities in Ukraine are carried out not with the support of the state, but against its unjust laws. After all, only real and courageous charitable foundations and organizations can believe in the philosophy of philanthropy and humanity, which, despite the ruthless double taxation of the collected charitable funds, still continue their activities and affirm good.
It should also be noted that objectivity is a small plus in domestic law for those who want to make the world a better place, but there is a so-called tax rebate. Article 166 of the Tax Code of Ukraine contains paragraph 166.3.2, which states that a taxpayer who transferred funds to charitable non-profit organizations is entitled to a refund of not more than 4% of his total taxable income for the current reporting year. But, again, for some reason it is not promoted for the educational purposes of citizens, and only a few people know about it, and if they do, they have already felt the influence of the bureaucratic system.
Similar motivation and encouragement for charity operates, for example, in the United States.
As Andriy Dovbenko, a partner at Evris Law Firm, notes in his blog, the practice of refunding taxes for charitable contributions to registered funds is widespread in the country of great potential. This is a fairly workable algorithm of action of US residents: you fill out an annual tax return, indicate to whom and how much you gave, and then get a tax rebate. Of course, it cannot exceed a certain percentage of the tax paid, so the discount for particularly large bills can be easily distributed over several years. However, services provided on a volunteer basis do not entitle to such a discount.
Can the charity tax situation in Ukraine change in the near future? With great optimism I want to say: "Yes, maybe!" After all, there are grounds for this - the Bill, which provides for an increase in the non-taxable amount of non-targeted charitable assistance; taxation of charitable assistance intended for foreign treatment is completely removed; non-residents of Ukraine are exempt from taxation of charitable assistance.
I would like to believe that this Bill will soon be registered in the Verkhovna Rada, which will be considered in the readings as soon as possible and will come into force later.
Author Kateryna Stebelska
This, of course, does not mean that charity as a social phenomenon will decline, but it can significantly reduce public confidence in charitable activities. After all, despite the fact that Ukraine is on the 90th place out of 139 in the World Giving Index , given that it was recently on the 103rd position, most Ukrainians will think three times whether to take their participation in charitable activities. Why so? The most common answer is distrust created by the state apparatus, in particular its tax system.
First, a potential benefactor may not be satisfied that not the entire amount of his contributions will go to a certain addressee, some will go to cover the tax in accordance with applicable law and to collect in the Pension Fund.
Secondly, the charitable collection is considered by the Tax Code and the Ministry of Finance as income, and therefore Ukrainian charitable organizations and foundations have to give a significant part of the funds raised for a particular treatment to a particular person in the form of tax contributions to the state treasury. If in the first case it will only reduce the charitable activity of citizens, in the second - it can prevent saving lives.
And what about other countries in the world?
Countries with developed and stable economies have long settled the issue of taxation of charitable funds, moreover, their population has long known and experienced from their own experience that doing charity is prestigious, profitable and safe. As a result, countries such as the United Kingdom, Germany, Italy, the United States, Singapore, the Netherlands, Slovakia, Poland, and France have long adjusted the system of taxing charitable funds raised by charitable foundations and organizations that have been officially audited and registered. Can we say that these countries have for the first time come to understand how the charity system should work in general? Probably not. But the fact that the very appearance of the phenomenon of charity at the legislative level there appeared much earlier than in Ukraine is a proven fact.
In 1997, with a clean slate and with great ambitions, Ukraine began to approve the processes of charitable activities at the official, legal level. The fact that this happened in the 6th year after the adoption of the Constitution is very welcome, but was it worth inventing a bicycle? Maybe it was necessary to look around, look closely and see that bicycles have long been invented, instructions for them are printed, and in general they are already in mass use? Sometimes it is still useful to change the methods in their activities.
And, in this case, to change the method of "trial and error" to the method of "acquaintance with foreign experience" or, as the classic Taras Shevchenko said: "не Do not shy away from your own, learn from others."Speaking of foreign experience, I mean, first of all, the historical background - the English cause of 1891, which became a fundamental document for the further rational development of lawmaking in the field of charity. It is the basic principles of this historical trial and formed the basis of modern legal regulation of charity in the same Britain, Italy, Germany and France.
Back in 1891, the London House of Lords held a high-profile lawsuit involving John Pamsel, the Moravian Church and Lord McNugten, which called for a tax to be levied on charitable funds raised by the church. considered charitable, and it was emphasized that taxation policy should in no way affect not only the church but also charitable organizations.
So why are we stepping on the same rake again? Why, when we sincerely want to help a person, the state demands money for this targeted assistance? Perhaps this is our modern consumer mentality, which unfairly identifies and equates the concepts of "help" and "money" ...
This can be seen in the current Ukrainian legislation, which identifies the following types of charitable assistance: material, targeted and non-targeted. Unfortunately, there is no clear distinction between them in the current Tax Code, but the system of taxation of charitable assistance (which is strange and incomprehensible) is defined and prescribed in Articles 164, 165, 170.7 of the Tax Code of Ukraine. And it is not written in favor of charitable foundations and organizations. Thus, if the charitable assistance of a certain charitable foundation is directed to an individual, then its recipient is obliged to pay income tax. Usually, a person who receives charitable assistance cannot do so, so the personal income tax of 18% determined by the Code is paid directly by the charitable fund. And if the person did not apply for help to the charity fund,
In general, in Ukraine, by law, all income on account of an individual is subject to taxation. There is also a penalty for late payment of tax. The fact that the state legally "allows" the tax sphere not to be taxed is not a drop in the ocean, but in the whole ocean! In 2018, the minimum amount of tax-free charitable assistance is 2,470 hryvnias. In cases when a person needs, for example, for treatment or rehabilitation, hundreds of thousands of hryvnias, this amount, of course, does not even look funny, but sarcastic, and even with a hint of bullying.We can say that charitable activities in Ukraine are carried out not with the support of the state, but against its unjust laws. After all, only real and courageous charitable foundations and organizations can believe in the philosophy of philanthropy and humanity, which, despite the ruthless double taxation of the collected charitable funds, still continue their activities and affirm good.
It should also be noted that objectivity is a small plus in domestic law for those who want to make the world a better place, but there is a so-called tax rebate. Article 166 of the Tax Code of Ukraine contains paragraph 166.3.2, which states that a taxpayer who transferred funds to charitable non-profit organizations is entitled to a refund of not more than 4% of his total taxable income for the current reporting year. But, again, for some reason it is not promoted for the educational purposes of citizens, and only a few people know about it, and if they do, they have already felt the influence of the bureaucratic system. Similar motivation and encouragement for charity operates, for example, in the United States.
As Andriy Dovbenko, a partner at Evris Law Firm, notes in his blog, the practice of refunding taxes for charitable contributions to registered funds is widespread in the country of great potential. This is a fairly workable algorithm of action of US residents: you fill out an annual tax return, indicate to whom and how much you gave, and then get a tax rebate. Of course, it cannot exceed a certain percentage of the tax paid, so the discount for particularly large bills can be easily distributed over several years. However, services provided on a volunteer basis do not entitle to such a discount.
Can the charity tax situation in Ukraine change in the near future? With great optimism I want to say: "Yes, maybe!" After all, there are grounds for this - the Bill, which provides for an increase in the non-taxable amount of non-targeted charitable assistance; taxation of charitable assistance intended for foreign treatment is completely removed; non-residents of Ukraine are exempt from taxation of charitable assistance.
I would like to believe that this Bill will soon be registered in the Verkhovna Rada, which will be considered in the readings as soon as possible and will come into force later.
Author Kateryna Stebelska